Feb 15, 2021

Pulling the Plug on your office space? – Trends from San Francisco

People working in a modern office environment.

Many companies are now officially releasing office space and switching to remote working. According to SFGATE, Uber, Pinterest, Yelp, Salesforce, Twitter, and Dropbox are just some examples of companies that are trying to minimize their office space and have employees work from home. Even though this is mainly a trend following the Covid-19 pandemic, research has pointed to the benefits of flexible working for decades, indicating that there is something longstanding, even futuristic with home offices and reduced HQ-space.

However, research also indicates that office space has its benefits. Instead of pulling the plug
completely, companies are starting to raise questions about how much space can be reduced, but also what to reduce. In 2021, accurate measurement and data on office utilization will be the tools you do not want to overlook, and here is why.

The new trend in office reduction

Reducing office space can save companies money on rent and working from home can reduce time spent in traffic and costs surrounding transportation. One surprising fact is that most offices around the world only achieve 50% resource utilization, which is an inefficiency that needs to be managed.

One example is one company in San Francisco. They are an international corporation with 1,000 seats in San Francisco and over 12,000 office desks world-wide. Even before Covid-19, the total office utilization reached about 50% in maximum capacity. This means that of 1,000 seats available in their San Francisco office, only 500 were used. One seat cost around 30,000 dollars a year in a central location, which adds up to a total cost of 300 Million dollars per year in total. With a 50% utilization, the seats become twice as expensive in an already costly area. Effective reduction can in this case save the company 150 million dollars a year for one office!

Moreover, even if the trend of office space reduction follows the recent COVID-19-restrictions, it has also brought up the inevitable fact that offices were not properly utilized to begin with. In San Francisco, the trend of “Pulling the Plug” on lease contracts are evident. One example is Salesforce, an employer of over 9 000 people in the San Francisco Bay Area, which is now making flexible working reality.

According to SFGATE, they are estimating that 65% of employees will work from home, which effectively will allow for more than 50% reduction in office space. Dropbox is another example of a company pulling the plug. Recently they announced thar their office space will be up for subleasing after initiating permanent remote working for employees. Pinterest, one of the largest websites in the world, canceled its office lease in the San Francisco area, and rumor has it that Uber is unloading 300 000 square feet of office space. Magnus Arildsson, Flowscape’s Business representative in US and Canada, has followed the recent office trends and believes that this is only the beginning of a larger shift in workplace management.

“The new trends I see in Silicon Valley now is all about reducing office space and allowing employees to work from home. This drive comes with great responsibility for HR and Facility leaders to ensure and maintain positive employee experiences by offering technology support for booking Rooms, Workstations, Visitor Management, Access control and information about when my closest colleagues are planning to be in the office. My former employer IBM – spend over a decade pushing for more work at home only to reverse the initiative 2018 after some severe impact on employee experience and productivity - I expect a lot of organizations to make a similar journey as IBM did.”

As Magnus mentioned, it is likely there will still be a need for office space in the future. Much alike IBM, SHRM reported that the Bank of New York actually announced that they would end their work-from-home policies in November 2018, long before the pandemic. Other companies, like Yahoo, Aetna and Best buy also made the same decision after having their employees work remotely for a period of time. Why?

Its reported that this was mainly because of the lack of collaboration, supervision, connection to the company and decreased productivity. One of the most important parts of the decision to return to a traditional office set-up is the connection to the workplace. Research shows that people who work remotely identity with the company to a lesser extent compared to people on-site. And online collaboration is also shown to be effective only if the team has worked together face-to-face before initiating online working.

We have touched on the problems with switching to only remote working before. Reducing office space is highly beneficial, but it has to be done in a way that allows for work and collaboration on-site. With all of these factors in mind. How do we create the perfect balance between optimal office utilization, flexible working, and on-site collaboration?

The Future Office Analytics Tools

Companies are now turning their gaze to sensor technology. “If you cannot measure it, you cannot improve it”. By using accurate data on how your office is utilized, it is possible to make educated decisions on what parts of the building can be sold off, and how many seats that are actually needed. The risk with reducing office space without good statistics is that the reduction will actually result in office space deficits, minimized productivity and lost collaboration instead.

Some organizations have used manual analysis of their office utilization for specific periods to monitor the number of employees working in the office each day, but there are limitations to this method. Only a brief period can be covered with manual measurement which does not account for seasonal trends. It is also challenging to observe the difference before and after any office changes. Therefore, the collected data will not be sufficiently reliable for the business to make strategic property decisions. Read more about the benefits of sensor technology here.

Use Sensors to optimize your office space

Sensors have proven to be the most economic option to monitor utilization, with the annual cost likely to be less than a month of manual measurement. It also produces accurate, granular real-time data about the precise utilization of every single resource throughout the day. You can observe changes and trends in office usage to create a thorough understanding of your office environment.

Analytics and Reporting

Combining sensor technology with powerful analytics software is the future toolbox for office
utilization and something facility and property managers can use to combine work-from-home orders in a cost-efficient way. Compared to manual analysis, data collected from sensors can be analyzed daily. Office utilization can be compared between time periods, floors, buildings, rooms and decide what space to reduce.

Pulling the plug?

How do we act on these new trends? Reducing office space can be an effective tool
to cut costs and enhance workplace satisfaction. Working from home can also be a good solution to increase job satisfaction and flexibility. Even if many companies are terminating lease contracts and adapting permanent work-from-home strategies, we are not pulling the plug on office space just yet. An office is still needed for many reasons, and the question is not about have-have not, rather it's about how-much and where.

In the heart of office utilization lies the employee experience, without relevant data and effective smart-office tools, space reduction can decrease productivity and collaboration. With them, employees can work more from home and at the same time, enjoy an office that promotes team experiences and workflow.

Having office analytics tools up and running in 2021 will therefore be essential to
enable effective workplace reduction when integrating flexible working into your employees lives. Feel free to contact us for more information, we can help you select a solution that fits your individual needs.